Complex Laws Around Healthcare Employees Get More Complicated - Changes to Non-competes, Confidentiality, Independent Contractor, and Joint Employment Rules Impact Healthcare Providers



Employers have seen an enormous number of changes recently to various rules about how they manage their employee base. This includes a Notice of Proposed Rule Making by the Federal Trade Commission (FTC) in late 2023, sweeping memorandums from the National Labor Relations Board (NLRB), changes in Iowa statutes that relate to health care temporary workers and mental health providers who are employees, and final rules from the NLRB on joint employment.

All of this is deeply complicated for employers of all types, but in the healthcare world, it can be particularly cumbersome to try to mesh all of the competing agency expectations and demands from the Centers for Medicare and Medicaid Services (CMS) to the NLRB.

These issues are further exacerbated by the fact that healthcare employment does not follow the traditional manufacturing industry structure that the NLRB uses when crafting its directives. Healthcare is a complex and sometimes chaotic mix of employees, independent contractors, and persons who, due to their licensure and rules of ethics, must exercise substantial independent judgment, particularly in relationship to medical decisions as well as having multiple joint programs, practices, leased employees, and groups that might simply rent space. Healthcare is widely considered to be the most highly regulated industry in the United States and the employment realm is no different.


Over the last two sessions, the Iowa legislature passed two separate laws relating to non-competes within the healthcare arena. The first prohibits staffing agencies or traveler groups from using non-competes for employees such as CNAs, LPNs, and others. The statutes do not address providers such as MDs and DOs, or direct employer non-competes, as it goes solely to the question of agency and agency non-competes. Second, due to critical shortages in mental health providers, the legislature passed a statute that prohibits entities that employ mental healthcare providers from requiring such providers to enter into a non-compete. This also requires that those providers be able to access patient records if they are leaving the practice to support continuity of care.


In 2023, the FTC propounded a new rule that prohibits non-competes across the board in all industries, except for those who have had significant ownership in a business. Given the enormous number of comments received on this proposed rule, the FTC pushed back finalization, and it is anticipated that at least a preliminary determination regarding the nature and structure of the rule, along with more limitations, will be announced in April 2024.

Substantive changes to the proposal are expected, with potential limitations to include an exemption for highly compensated employees, as we see in several other states. There may be a possible exemption for certain professions that have substantially more information relating to any individual business or industry, and which could create distinct competitive problems. It is anticipated that the Iowa legislature will continue to look at various proposals regarding further restrictions on non-competes this session in addition to these actions at the federal level.


The NLRB, through memorandum statements, has also indicated that non-compete agreements are likely to violate Section 7 of the National Labor Relations Act (NLRA) as they prohibit an employee from leaving a non-compliant employer and seeking employment elsewhere.

Note that the NLRA typically applies to those employers who are either unionized or have a potential union push/election going on. However, Section 7 of the NLRA, which prohibits employers from limiting an employee’s ability to question, discuss, or act relating to the terms and conditions of employment, applies to all employers regardless of union status.


Confidentiality is a big area that can encompass everything from non-disparagement statements, severance agreements, cooperation statements, such as providing testimony in future lawsuits or making themselves available for interview through issues that may be covered by HIPAA or HITECH, including patient information and documentation. It also can include intellectual property issues.

In the healthcare arena, this push to make things less confidential, primarily through the NLRB, comes into direct conflict with HIPAA/HITECH, the FTC’s Health Breach Notification Rule which primarily relates to vendors of personal health records including online apps, and the increasing number of states that have with specific legislation about consumer information and data and how that data is used, shared, and stored.

All of this makes it increasingly important that employers, particularly those in healthcare, understand the nature and type of data and documents that are utilized, create solid policies and practices to protect such documentation, define both the nature of the data and prohibitions in ways that their employees understand as well as acknowledge and train on these policies and practices.

There is a huge array of data that is highly confidential in the healthcare setting, including credentialing, peer review, patient data, and QI. Given the rule of “primacy,” those statutes that were more specific in the protection of data such as FTC rules and HIPAA/HITECH would take precedence over a more generalized pronouncement of the NLRB relating to limitations on how you can enforce data protection requirements with employees.

The Joint Employer Rule

Joint employment usually comes into play in the healthcare arena where a worker is at your facility through a temporary agency, although it could also be implicated in a variety of other circumstances: such as when you house a physical therapy group and those PTs work on your floor or in your LTC in a way that is interconnected with your CNO/DON, house supervisors, floor nurses, and others.

In October 2023, the NLRB issued its Joint Employment Standard - The Final Rule with an original effective date of December 26, 2023, and extended to February 26, 2024, due to multiple pending legal challenges.

This Joint Employer Standard goes back to an earlier standard that had been used by the NLRB, again focusing on what the NLRB calls the essential terms and conditions of employment. If you can impact or affect a person’s essential terms and conditions of employment, then you may be considered that worker’s employer in conjunction with the temporary agency or other company that is employing the worker.

Essential terms and conditions of employment include:

  • Wages, benefits, and compensation
  • Hours of work and scheduling
  • The assignment of duties
  • The supervision of duties
  • Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline
  • Tenure/hiring and discharge
  • Working conditions related to health and safety

At first blush when looking at this list, any employer would assume that all employers are joint employers at all times because it is not possible to have a temporary worker or even a visitor come onto your premises in the healthcare world and not have specific rules and requirements relating to health and safety, including infection control, management of data and some form of supervision.

Take, for example, radiology – according to the federal rules and the expectations of accreditation, you cannot simply let people wander around in a medical lab unless they are assigned to that area or an accredited technician. In healthcare, there are always rules.

Of particular importance is that the standard now includes what is considered to be “reserved control” and was called “indirect control.” Even if you are not directing the workers' current compensation, hiring, and firing, or similar issues, or if you would not independently discipline the worker but would need to contact the agency to then discipline the worker, you are still exercising either reserve control (something you could do in the future) or indirect control (control through a third party) which could potentially render the entity a joint employer.

You may be wondering – why do I care? I already contract payment and a variety of other things to the temporary agency, and, in fact, I as the employer am paying a premium for those things. If you are deemed to be a joint employer under the rules, you, as the entity, can be held liable for a variety of things including failure to pay wages, failure to properly pay overtime, health and safety concerns, wrongful termination, and potentially issues relating to union campaigns or union questions.

Independent Contractors

On January 10, 2024, the DOL issued its new final rule on independent contractor classification under the Fair Labor Standards Act. This rule will be effective March 11, 2024. Like the NLRB rules on joint employment, this rule goes back to a prior interpretation of independent contractor status, specifically rescinding the 2021, Independent Contractor Rule. The new (old) rule once again focuses on a multi-factor “economic reality test.” The DOL specifically states it is looking into whether or not the independent contractor is as a “matter of economic reality economically dependent on the employer for work.”

As many employers have already stated, this can be a very difficult rule to apply as every vendor, employee, worker, or independent contractor is typically, to some extent, economically dependent upon the person paying the bills, which in this instance would be the entity. The DOL sets out a series of factors for consideration: 

  • Opportunity for profit or loss depending on managerial skills
  • Investments by the worker and the potential employer (note that the anticipation would be that there would be greater investment by the worker rather than the employer in an independent contractor agreement)
  • Degree of permanence of the work relationship
  • Nature and degree of control (which is also a consideration in the joint employer standard)
  • Extent to which work performed is an integral part of the potential employer’s business
  • Skill and initiative (which may be a critical issue to consider when you assess the difference between a surgeon being an independent contractor or a CNA)

The DOL has noted that no single factor controls and that it would be a weighing of factors together which will lead it to a determination as to whether or not someone is appropriately classified as an independent contractor.

A common question that many employers ask is whether or not someone can simply waive employee status. This occurs quite frequently in healthcare when people retire and then want to do limited work but only as an independent contractor. Being classified as an employee is not a waivable right. An employee cannot simply agree that they are an independent contractor and they become an independent contractor. An agreement of that type will not generally serve to limit the entity's liability risk.

The Big Picture

How each of these changes is applied to various employees, workers, or independent contractors within your entity is likely going to depend not only on structure but on the category in which these workers fit. Highly skilled, licensed professional workers such as physicians and advanced practitioners have greater latitude and responsibility as well as independence relating to any work performed and are likely to be considered differently than other types of employees. Those who work directly with patients or have direct access to patient information will continue to be subject to more limitations on data access and sharing, training, and similar matters than someone who works primarily in the outdoor plant.

Additionally, professional expectations, rules of ethics, medical malpractice insurance, and liability risk all must be considered when structuring the classification for an employee or worker in contracting, including both independent contractor and joint employment paradigms, where the clarity of where a person reports, what authority the entity has over them, and their ability to act independently is increasingly important in being able to prove that someone is most appropriately a worker or independent contractor rather than an employee.

Traditionally, when someone has been paid through another entity or agency, there has been at least one indicia that they are not an employee but are, in fact, an independent contractor. Other factors to continue to consider, as noted in the various rules, are whether or not they have multiple employers, and/or are free to leave at any time without penalty or discrimination. But note that a surgeon, physical therapist, or MDS coordinator who works for multiple entities, owns their own company, likely employs others through that company, and has substantive control over the work done, is in a different position under any rules than a CNA, medical aide or restorative aide who works multiple jobs to make ends meet.

As outlined above, defining data and the information that you need to protect determines what rules apply to employees versus independent contractors or temporary workers, and making sure that contracts are clear, specific, and mesh with complex and sometimes conflicting rules becomes increasingly important.

Many hospitals already have a model of the independent contractor status through the medical staffing rules which differ from the rules that may apply to employed physicians. Given that there are multiple pending lawsuits and challenges to these rules, and that some of the rules including the FTC proposal regarding non-competes are not finalized at this time, employers need to continue to monitor these changes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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